The rich strike back

NEW YORK — Just a few months ago, it looked like 2014 would be the year of the populist, with Democrats running on economic inequality, tea party Republicans bashing banks and newly minted New York City Mayor Bill de Blasio pledging to soak the rich with higher taxes.

That was so January. The terrain is now shifting fast as the 1 percent fights back hard and the effectiveness of the populist approach comes into question.

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Fresh off a bruising loss in Florida, the Democratic playbook for the midterms appears in need of a major rewrite — and the pro-business wing of the party is ready to draw up new plans. President Barack Obama in his budget once again floated a plan to raise taxes on Wall Street, but no one took it seriously. And just days later, the president was raising money at the home of one of the wealthiest private equity executives in New York. Mayor de Blasio’s hopes to increase taxes on the wealthiest got blown out by Wall Street’s newest hero, New York Democratic Gov. Andrew Cuomo. And de Blasio is facing major heat from the rich over his opposition to charter schools.

In two-dozen interviews, the denizens of Wall Street and wealthy precincts around the nation said they are still plenty worried about the shift in tone toward top earners and the popularity of class-based appeals. On the right, the rise of populists including Kentucky Sen. Rand Paul and Texas Sen. Ted Cruz still makes wealthy donors eyeing 2016 uncomfortable. But wealthy Republicans — who were having a collective meltdown just two months ago — also say they see signs that the political zeitgeist may be shifting back their way and hope the trend continues.

“I hope it’s not working,” Ken Langone, the billionaire co-founder of Home Depot and major GOP donor, said of populist political appeals. “Because if you go back to 1933, with different words, this is what Hitler was saying in Germany. You don’t survive as a society if you encourage and thrive on envy or jealousy.”

Langone’s comments — sure to draw ire from those who find such comparisons to Nazi Germany insensitive — echo previous remarks from venture capitalist Tom Perkins, who likened the actions of some in the Occupy Wall Street movement to the Kristallnacht attacks on Jews in 1938. Perkins gave several interviews after the ensuing uproar, but he never really backed away from the comparison. And Langone showed no hesitancy in invoking the Nazis when describing current populist rhetoric.

The Democratic power elite now believe that appeals to raise the minimum wage and extend unemployment insurance are not enough to overcome Obama’s deep unpopularity and frustration with the president’s signature health care law. They fear that unless Democrats shift footing to a more hopeful, growth-based message, the party could lose the Senate and drop double-digit seats in the House.

“Reducing inequality is good, but it’s 50 times better to do it by lifting those up who are low than by tearing those down who are high,” said Larry Summers, the former treasury secretary whose bid to become Fed chair got derailed by the more liberal wing of the Democratic Party. “The politics of envy are the wrong politics in America. The better politics are the politics of inclusion where everyone shares in economic growth.”

Democratic Rep. Jim Himes, whose Connecticut district includes many wealthy Wall Street executives, said the populism associated with de Blasio and Massachusetts Democratic Sen. Elizabeth Warren was never as dominant as the media suggested. “All too often people forget that this is just one politician from Massachusetts and one from New York City and what they say is not going to dominate politics in Arkansas, or Florida or Texas or anywhere else,” Himes said. “Income distribution may be far from ideal, but people don’t necessarily only want to hear about increased taxes on the wealthy.”

Wall Street Democrats believe Obama is fundamentally sympathetic to that argument. “The energy in the party may be with progressives, but Obama is still the same cool, pragmatic guy he’s always been,” said a Wall Streeter who attended the recent fundraiser with the president at Blackstone Group President Tony James’s Manhattan home. “He’s got liberal values, but he’d always like to cut a deal.”

Obama’s New York trip last week also included a Democratic National Committee fundraiser at the home of Alan and Susan Patricof, wealthy donors who strongly backed Hillary Clinton in 2008 and have mostly stayed away from events featuring the president. Some saw the DNC fundraiser as Obama acknowledging the need to embrace a broader swath of the business community after five years of strained relations.

On the Republican side, signals also indicate a shift back toward the establishment.

A former Washington lobbyist, of all people, just won the critical special House election in Florida. Republican leadership successfully destroyed tea party hopes for fresh showdowns this year on the budget or raising the debt limit. And Senate Minority Leader Mitch McConnell (R-Ky.) recently pledged to “crush” tea party challengers around the country.

Populists such as Paul and Cruz often do well in early GOP polls for the 2016 nomination and at youth-focused events like the recent CPAC conference. But the party’s elite establishment believes the nomination for 2016 will ultimately go to a less polarizing figure such as former Florida Gov. Jeb Bush or 2012 vice presidential nominee Paul Ryan, should either decide to run.

“Take the fact that the tea party is kind of on its heels in Congress and that a registered lobbyist won in Florida and that a lot of the party is revolting against this proposed bank tax, and you’d have to conclude that the establishment is not exactly dead,” said one Wall Street Republican, who like many asked not to be identified by name in order to speak freely about his views on the direction of the party.